THE IMPACT OF CROP ROTATION ON PROFITABILITY AND PRODUCTION RISK IN THE EASTERN AND NORTH WESTERN FREE STATE

Abstract

Diversification is a generally accepted measure against production risk. Crop rotation as a unit of diversification can reduce risk even further. Net returns and risk, defined as the cumulative sum of shortfalls below a disaster target level of net return, were estimated for two long term crop rotation trials. One was conducted in the eastern Free State where maize and wheat in monoculture were compared with rotations involving fallow, drybean, soybean and sunflower crops. In the second trial located in the north western Free State monocropped maize was compared with rotations involving groundnut, soyabean and sunflower crops. Crop rotation and the associated diversification produced results varying from increased to reduced net returns and increased risk to dramatically reduced risk depending on crops involved and the net return level accepted as a disaster threshold. Compared to monoculture, groundnut improved net returns without affecting risk. Drybean and soybean improved net returns and reduced risk while sunflower was the most effective in reducing risk with little effect on the net return. Risk reduction in the eastern Free State was mainly due to rotational benefits such as improved yields. In the north western Free State, however, risk reduction was mainly due to the inclusion of crops with relatively low risk.